Mark Hup (Peking) – Life Annuities and Adverse Selection: The Case of Early Modern Holland
How do people deal with the idiosyncratic risk of outliving their resources? In modern times the most common solutions are publicly- and privately-provided retirement funds and social security systems. In premodern times, however, such solutions were often unavailable. Our understanding of how people dealt with longevity risk in premodern times is also limited by data scarcity. By constructing a new dataset of over 1,000 life annuities, this paper sheds light on a key premodern tool for dealing with longevity risk: life annuities. Life annuities guarantee a steady stream of payments throughout the life of the annuity’s nominee.
The paper focuses on the seventeenth-century Dutch Republic as it was at the forefront of financial innovation and vastly expanded its public debt. While life annuities were main debt instruments in the early 1600s, they were quickly eclipsed by bonds and redeemable annuities. Why was this the case? I find that adverse selection was key. Life annuity interest rates were not age-dependent, so buyers mainly nominated young and healthy children. By the same token, life annuities were not profitable for older self-nominating buyers. Life annuities were therefore expensive for the state. In the absence of pricing reform, other debt instruments were more advantageous to the state. The lack of growth in life annuities, however, meant that an important means of insurance had limited availability. Ostensibly minor public finance details can therefore deeply impact long-term financial market development and the welfare of different societal groups.
Bram Hilkens (Erasmus University Rotterdam) – Living off the Land? An Empirical Investigation of Land and Lease Distribution in Central Holland, 1600-1700
Horrific as the hardships of epidemics may generally be, epidemic mortality had until recently been heralded for its equalizing effects to struck societies. This notion, however, has come under scrutiny. The current paper attempts to add to the state of the art by systematically assessing wealth inequalities in an underexplored, yet important area and time span, namely seventeenth century Holland. It will reconstruct distribution of land and align those with mortality spikes, assessing the mechanisms informing the makeup of these distributions and fluctuations in it over time. Thus, rather than accepting a general law of epidemic mortality leading to greater equality, the current paper attempts to explore the mechanisms that inform preindustrial inequality and the role epidemic mortality plays in it.
This paper aims to explore the role of land in the agrarian economy of seventeenth century Holland, asking questions on the importance of land for subsistence, its market mechanisms, and the factors influencing the importance of land ownership and leaseholds over time, including risks of loss of (access to) land. It attempts to do so by reconstructing land ownership and leaseholds across seventeenth century Holland. Its main argument is that the role of land ownership vis-à-vis tenure in Holland’s agrarian economy in the seventeenth century evolved non-linearly, and was mostly, though not always, affected by a combination of reactions to and preparations for market pressures, demographic fluctuations, and institutional arrangements.
The paper serves as an elaborate explanation of the workings of land distributions and land markets, so as to provide a solid base for assessing the effects of epidemic mortality on land and lease distributions. In other words, before zooming in on the direct effects of demographic fluctuations on land distributions and institutional transition, it is vital that we first understand general trends and patterns in land distributions and leaseholds in the region and period under investigation.
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